Freight collect vs prepaid: who pays the carrier, and where it says so
Freight collect vs prepaid comes down to one question: who pays the carrier? The answer lives in a small box on the bill of lading, and leaving it blank or getting it wrong is how invoices go to the wrong party. This guide explains prepaid, collect and third-party billing, what freight allowed means, and how these terms relate to who owns the freight. We dispatch carriers and don't ship freight or quote rates; the terms matter to anyone on a bill of lading.
Pick an option in the box below to see who the carrier invoices.
FREIGHT CHARGES
The carrier invoices the shipper.
The shipper pays the carrier. The shipper may add the charge to its invoice to the buyer, which is called prepaid and add.
On a brokered load, the broker pays the carrier under the rate con whatever this box says; the box decides who the broker bills.
Prepaid freight
Prepaid, marked PPD, means the shipper pays the freight charges. It's the most common arrangement on outbound freight, because the shipper chose the carrier and controls the shipment. The shipper can absorb the cost or pass it on. When the shipper adds the freight to its invoice to the buyer, that's often called prepaid and add.
Freight collect
Collect means the consignee pays when the freight arrives, or is billed after delivery. It suits buyers who have their own carrier rates or prefer to control shipping costs. Large retailers often require collect or third-party terms on inbound freight so they can manage carriers and dock appointments themselves. The risk is that the consignee refuses to pay, or wasn't expecting the bill, so collect shipments work best when the buyer has agreed and has credit with the carrier.
Third-party billing
Third-party billing sends the freight bill to someone else entirely: a parent company, a buyer's logistics provider or a freight management company. The bill of lading must name the third party and its address in the bill-to section. Without it, the carrier may bill the shipper by default.
Freight allowed
Freight allowed is a sales term between buyer and seller, not a billing instruction to the carrier. It means the seller pays the freight and doesn't charge the buyer, or credits the buyer for it. It usually travels with prepaid freight. The carrier still bills whoever the bill of lading names.
On direct freight, the terms box decides who you invoice. Our dispatchers confirm who pays on every load, so the invoice goes to the right party the first time.
Get billing sortedA worked example
Same shipment, three ways to payExample
- SHIPMENT6 pallets from a supplier in Ohio to a store in Tennessee (EXAMPLE)
- PREPAIDSupplier pays the carrier; adds the freight to its invoice to the store
- COLLECTStore pays the carrier after delivery, using its own carrier rates
- THIRD PARTYThe store's logistics provider pays, named in the BOL bill-to box
- ALLOWEDSupplier pays the carrier and doesn't charge the store for freight
It's the same freight on the same truck in every case. Only the name on the freight bill changes.
Choosing between collect and prepaid
Shippers usually choose prepaid when they have good carrier rates, want control of the shipment, or sell on delivered pricing. Buyers prefer collect when they have better rates of their own, want to choose the carrier, or consolidate inbound freight. Third-party billing suits companies that centralize freight spending. The choice is part of the sales agreement, and it should match the bill of lading every time. When the terms change for a customer, update the shipping instructions your dock uses, so the next bill of lading is marked the new way rather than out of habit.
Collect is not COD
Freight collect and cash on delivery are different. Collect means the consignee pays the freight charges. COD means the carrier collects payment for the goods themselves at delivery and remits it to the shipper, a separate service that some carriers offer and many don't. A bill of lading can be collect without being COD.
Common mistakes
- Leaving the terms box blank.
- Marking third party without the bill-to name and address.
- Marking collect when the consignee hasn't agreed to pay.
- Assuming the payment term decides who owns the freight in transit.
Collect and prepaid vs who owns the freight
Payment terms and ownership are separate questions. Who pays the freight is set on the bill of lading. Who owns the freight in transit, and so who files a claim if it's damaged, is set by the sale terms, often FOB origin or FOB destination. A shipment can be prepaid and still owned by the buyer in transit. Our guide to freight terms explains how these terms fit together, and freight in vs freight out covers how each side records the cost.
What carriers should check
On brokered freight, the broker pays the carrier under the rate con, whatever the box says; the box decides who the broker bills. On direct freight, the box is your instruction. Before pickup, check that the terms are marked and, for collect or third-party loads, that the paying party is named and expecting the bill. Send the invoice to that party with the signed bill of lading and proof of delivery. The trucking invoice generator builds the invoice with the right bill-to.
Pricing terms that travel with payment terms
How the freight is priced is a separate question again: per mile, per hundredweight, or one flat rate freight price for the load. Some carriers also price by origin and destination freight zones. Whatever the pricing, the terms box decides who receives the bill.
What to check and document
Small fleets running direct freight invoice more parties than owner-operators on brokered loads. Our small fleet dispatch desk confirms who pays before you book, and you approve every load. Send an application.